The birth of a contentious relationship www.coha.org

Elections in Brazil this weekend will mark an historic watershed in that country’s relations with the U.S. in the event of a victory by left-wing frontrunner Luiz Inácio Lula da Silva (Lula).  With a population fast approaching 200 million within a matter of years and a geographical area larger than the contiguous United States, Brazil is now set to break out from its more than 100-year run as playing a subordinate role to that of the U.S., as it strikes out on a new, more independent position in its bilateral relations with its northern neighbor.

In recent months, behind-the-scene tensions have slowly developed between the two nations over Brazil’s mounting assertions regarding its claim for a permanent position in the U.N. Security Council, its outrage over Washington’s application of punitive tariffs on Brazilian steel exports and the Bush Administration’s heavy subsidies of U.S. agricultural exports. The last undercuts the competitive standing in international markets of Brazilian commodities and industrial goods, most notably those of orange juice, sugar, cotton and soy beans.

In a weekend interview with Reuters television, Council on Hemispheric Affairs (COHA) director Larry Birns observed that Washington is ill-prepared to relate to Brazil in its new role as the hemisphere’s other giant, and that U.S. negotiators will have to make tough concessions to Brazil in upcoming Free Trade Area of the Americas (FTAA) trade talks, once a Lula administration takes office, especially if it intends to keep the country within the hemispheric trade zone it is now fashioning, and not lose it and other regional nations to the European Union bloc.

While Lula certainly will not become another Fidel Castro, and while the likely new president has stated he will honor all of Brazil’s current commitments to the international lending agencies, debt default cannot be entirely locked out, but would occur only in the most extreme of circumstances. There is no question that in terms of tone, style and content, Lula is not at all likely to follow the lead of current President Fernando Henrique Cardoso, who moved significantly to the right after taking office in 1994.  Under Lula’s leadership, Brazil is scheduled to have much closer relations with Cuba and cooler dealings with Mexican President Vincente Fox, who Lula is known to see as playing a surrogate role for the U.S. in pressuring Cuban reforms.  Significantly, more budgeting weight and concern will be directed to the country’s social needs, with less emphasis on privatization, deflation and contractionist fiscal policies.

Brazil’s current growing role in the international system has its origins in the period of 1902-1912, when foreign minister Baron de Rio Branco developed the Ministry of External Relations, known as Itamaraty, as an important institution for administering the country’s foreign policy. Rio Branco’s tenure witnessed a singular evolution in Brazil’s diplomacy, which defined the perimeters of the Brazilian nation and established inter-American commercial arrangements, legal processes and regulatory frameworks, but never challenged Washington’s supremecy. Washington’s perspective on Brazil’s role in international and Latin American politics also has evolved, filling it with some unease, as the “sleeping giant” has gradually assumed a larger role in both regional and global politics and commerce.

In the mid 1980s, Brazil, like most Latin American countries, experienced an economic revolution resulting from increased access to the U.S. and global market. However, the imbalance in U.S.-Brazilian bilateral economic relations is evidenced by the often asymmetrical nature of both countries’ trade ties. The tariff and non-tariff barriers affecting Brazilian goods, which has impeded the U.S. import of Brazil’s relatively inexpensive product-line, and the overvaluation of the Real in the early 1990s, reduced Brazil’s competitiveness and contributed to negative trade balances.

Recently, Lula’s popularity has caused a stir in financial markets as he came to almost double his lead in poll results ahead of Cardoso’s handpicked candidate, Jose Serra. International investors regard Lula’s leftist leanings and inexperience in managing a national economy with uncertainty, if not outright apprehension. Lula, who opposed the FTAA in the past, says he will support it only if the U.S. and Brazil are treated as equals in negotiations. In this context, there is speculation that Lula, whose views differ from the current government’s somewhat-idealized vision of hemispheric integration, would possibly be inclined to facilitate the establishment of bilateral negotiations over trade with the U.S., if he takes office. If a U.S.-Brazilian bilateral free trade area is established as an immediate step (which is highly unlikely at this time) the presently undefined future of FTAA could be relegated to a matter of secondary importance as the two continental giants end up turning their trade ties to their mutual advantage.

This analysis was prepared by John Galante, COHA research associate.

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization.  It has been described on the Senate floor as being "one of the nation's most respected bodies of scholars and policymakers." www.coha.org

Spotlight By Roger Burbach* 29 October 2002

Elected in a landslide victory with over 61 per cent of the vote, Luis Inacio Lula da Silva will become president of Latin America's largest country, with 175 million inhabitants, on 1 January 2002. Lula, as he is commonly known, received three million more votes for president than George W. Bush did in the United States in 2000.

Leonardo Boff, a progressive theologian in Brazil, declares that Lula's triumph "represents the victory of a project from below, one of the poor". Lula's first act as president-elect was to create the Secretariat for Social Emergencies. Its primary responsibility is to end hunger and malnutrition among more than 20 million Brazilians. "If at the end of my presidential mandate every Brazilian has three meals a day then I will have realized my life's mission," Lula proclaimed.

This was Lula's fourth run for president. In this campaign he abandoned much of the leftist platform of previous campaigns, forging an alliance with more centrist political forces. This shift is symbolized by his choice of vice-president, Jose Alencar, who is Brazil's largest textile magnate and a leader of the centrist Liberal party. Alencar declares that the alliance is the product of a "novel political society", reflecting a new social pact, "where Lula represents labour and I represent capital". Asked why he accepted the position of vice-president, Alencar said: "In the history of civilization labour came first, and then capital. And also in my personal history... [I]t was labour that built my capital."

But it is an open question whether the United States and international bankers will adopt as enlightened a position as Alencar. Brazil has a public debt of 240 billion US dollars, the largest in Latin America. In the run up to the election on 27 October, foreign capital began to flee Brazil, leading to a depreciation of the country's currency, the Real, by over 40 per cent. Much of Lula's campaign questioned the free trade policies launched under the "Washington Consensus" during Ronald Reagan's administration in the 1980s. The consensus has meant not only the opening of Latin American markets to US trade, but also the privatization of state enterprises and the slashing of social spending in health and education.

According to a Brazilian financial advisory firm, ABM Consulting, the 10 largest banks in Brazil, including Citibank and BankBoston, earned returns of 22 per cent on their holdings in Brazil in 2001 compared to 12 per cent on a global level. George Soros, a forward-thinking international financier with significant holdings in Brazil, declares: "The system has broken down," it "does not provide an adequate flow of capital to countries [like Brazil] that need it and qualify for it."

The Bush administration, in its initial response to Lula's victory, declared that it "looks forward to working productively with Brazil". But, even before Lula's victory, the US under secretary of the treasury, Kenneth Dam, stated, "we have a contingency plan" if Brazil declares a moratorium on its international debt.

Dam provided no details, but the International Monetary Fund (IMF), the leading financial institution backing the position of Washington, moved to lock the future government of Brazil into an economic straightjacket when it lent 30 billion US dollars to the outgoing government of Fernando Henrique Cardoso, in an attempt to prop up the Real. Only 6 billion US dollars will actually be spent under Cardoso, while the remainder will be released to the incoming government if it has a budget surplus of 3.5 per cent. No government in South America has achieved such a surplus in recent years.

Right-wing pundits and policy strategists in the United States have already begun to criticize the Lula government. Constantine Menges, a Senior Fellow of the Hudson Institute who served as the Latin American adviser in the National Security Council under Ronald Reagan, recently released a study entitled "A strategic warning: Brazil". In it, he decries the "Castro-Chavez-Lula axis", referring to Fidel Castro of Cuba and populist President Hugo Chavez of Venezuela. Menges argues that these countries are "capable of pushing other South American countries to the left and establishing a dangerous alliance with communist China, as well as with Iran and Iraq, two terrorist countries". This would constitute a gigantic "South American left bloc", which would have a domino effect in countries like Colombia, Bolivia, Ecuador and Argentina.

While Lula certainly is not intent on provoking the United States by consorting with Iraq, he is looking to other Latin American countries to strengthen an independent economic stance and to expand regional trade agreements. His first international trip will be to Argentina, which has defaulted on its international debt and is Brazil's leading partner in the regional trade bloc known as Mercosur.

Lula has made it clear that he will not support the trade initiative of the Bush administration, the Free Trade Area of the Americas (FTAA), unless the United States abandons trade policies that discriminate against Brazil. Among other provisions, the FTAA advocated by the United States envisions the protection of Florida orange juice interests and Midwest soybean producers along with US steel exporters. Brazil is the world's largest exporter of orange juice, a leading exporter of soybeans and also exports large quantities of steel. (Interestingly, Lula began working in the metallurgical industry when he was just 14 years old.)

If there is one position Lula consistently articulated in this presidential campaign, it was his call for "expanding Brazil's productive capacity". In his last presidential debate with Jose Serra, who represented the outgoing government, Lula stated: "Brazil is a great country. It has enormous resources that we have not even begun to turn to the benefit of our people." The day after his election Lula proclaimed that budgetary restrictions would not prevent him "from expanding social programmes", decreasing unemployment and "expanding educational opportunities for Brazil's poorest".

*Roger Burbach is co-editor, with Ben Clarke, of September 11 and the US War (City Lights, 2002), and author of the forthcoming book The Pinochet Affair: Globalizing Human Rights. He is director of the Center for the Study of the Americas (CENSA) in Berkeley, California, USA.

Francisco José Moreno and Alejandro Eggers Moreno Pacific News Service Wednesday, Nov. 6, 2002

Calling Brazil's new president a leftist is far too simplistic, write PNS contributors Francisco José Moreno and Alejandro Eggers Moreno. In fact, the former metal worker's election is a clear demonstration of the changing face of Latin American politics, where nationalism and globalization are becoming more important terms than "left" and "right."

Headlines across the world shout about Brazil's new "leftist" president. But Luis Inácio Lula da Silva won a landslide victory in Latin America's largest economy by blurring traditional ideological boundaries and forming a broad-based, nationalist coalition of Brazilians ready to take on U.S. economic priorities and global financial institutions.

Lula's success is a clear demonstration of the changing face of Latin American politics. The traditional struggle between conservatives, backed almost unanimously by business and financial leaders, against socialists or populists supported by the working class is giving way to a new conflict. This conflict is between those committed to preserving national interests and those willing to accede to the demands of international financial institutions.

During the course of the campaign, Lula softened his staunch left-wing views and moved toward a more moderate, business-friendly position. He chose Jose Alencar, a millionaire textile magnate, as his running mate. He promised to uphold Brazil's international commitments and rejected a moratorium on foreign debt. He sought and won the support of numerous business and financial leaders, and proposed the formation of a Council of Economic and Social Development with representatives from business, trade unions and other sectors of society to negotiate a new social contract.

At the same time, Lula did not deny his dislike for the finance-oriented market policies driven by the International Monetary Fund (IMF) and other global institutions. He repeatedly denounced the current economic system and insisted he would under no circumstances support the U.S.-backed Free Trade Agreement of the Americas, claiming the proposed hemispheric free-trade zone would essentially signify the American annexation of Brazil's economy. Global free trade models, he said, would only become viable when all countries have equal opportunities and conditions to become competitive.

This is how did Lula managed to reconcile his seemingly leftist economic views with his newfound friendliness toward business leaders.

The demands of the international financial community over the past decade, specifically the strong emphasis on finance over production, has put Brazil in the position where the interests of most local businessmen, many local investors and middle-class professionals are beginning to coincide with those of the workers. The IMF-backed policies of recent years have been designed to pour money into the country, regardless of how it is used or distributed.

As a result, most of the money has turned to profits for foreign corporations or gone to the richest Brazilians, and much has been taken out of the country for investment elsewhere. Little attention has been paid to actually strengthening the ability and capacity of the Brazilian economy itself, leaving in the lurch all but the largest businesses, all the workers and most of the professionals who serve them.

So when Lula talks about how Brazil's problems go beyond its debt and that the country needs to focus more on boosting imports, creating jobs, and stimulating local business, he speaks for a wide range of Brazilians, employers and employees alike.

He reframed the election from a contest between the left and the right to a struggle over who gets to determine Brazil's future – the U.S.-led global financial community, or Brazil.

It is not difficult to explain how Lula secured such a large percentage of the vote. Unlike other recently elected leftist leaders in the region – Hugo Chávez in Venezuela, for example – Lula's popularity does not stem from a personality cult or an overwhelmingly destitute population desperate for any kind of change. He has been very clear that he has no interest in a Chávez-style popular revolution, and there is no indication that Brazilians would have any interest in such a change.

Lula managed to gain the support of his old enemies because he is no longer seen as protecting the poor against the abuses of businesses, but as protecting Brazil against the abuses of the United States and the financial policies it sponsors. Yet Lula's blurring of traditional liberal-conservative ideological distinctions in favor of a common nationalistic outlook is not limited to Brazil. In Argentina, for example, the financial crisis has polarized the country into pro- and anti-IMF camps, the latter including workers and business owners.

As Latin America continues to reject the economic model that has been foisted upon it during the past decade, politics will increasingly take this form in the rest of the region.

FRANCISCO JOSE MORENO, Ph. D., President of the Strategic Assessments Institute; former Vice-President of Philip Morris International; former Professor and Chairman of the Political Science Department at New York University; former Lecturer in Economics at the University of California, Berkeley; author of three books and over 30 academic articles; has served as adviser to two European Prime Ministers and four Latin American Presidents.

ALEJANDRO EGGERS MORENO, (Groton and Stanford) Vice-President of the Strategic Assessments Institute; contributor to the Christian Science Monitor and the Pacific News Service; former correspondent of the Información Newspapers.

E-mail: sai@strategicassessments.com

Venezuelan Strikers Disagree as President Seeks Brazil's Help By Harold Olmos Associated Press Friday, January 3, 2003; Page A16

BRASILIA, Jan. 2 -- President Hugo Chavez of Venezuela said today that his country's oil industry, crippled by a month-long general strike, is recovering and will reach its pre-strike capacity in 45 days. Domestic opponents said the claim was false.

Chavez made the comments in Brazil, where he was attending the presidential inauguration, despite the turmoil of a strike led by opponents who seek to remove him from power.

Chavez met with Luiz Inacio Lula da Silva, who was sworn in as Brazil's president Wednesday, and asked him to send experts from Brazil's state-owned oil company to replace some of the 40,000 Venezuelan state oil company workers who have walked off the job.

After a breakfast with Silva, Chavez said the Brazilian president said he would consider the request and discuss it with the new head of Brazil's oil company, Petrobras.

Chavez has fired dozens of striking managers from the state oil monopoly, Petroleos de Venezuela SA, and sent troops to guard installations across the country. He insisted that replacement workers were slowly bringing refineries and oil wells back online.

Chavez said Venezuela is now producing 800,000 barrels a day, up from the 200,000 barrels at the country's lowest level of production.

In Venezuela, opposition leaders disputed Chavez's claim and said most of the industry's workers remain off the job. Strike leaders insist the government will not be able to restart operations without them.

Also, opposition estimates of current oil output were at odds with government assertions. There was no way to independently reconcile the figures.

Venezuela's Democratic Coordinator -- a coalition of opposition parties, business associations and labor unions -- insisted output was only 190,000 barrels per day and that natural gas production was down by 80 percent.

The strike, which began Dec. 2, has forced motorists to line up at service stations for hours. Store shelves were increasingly bare.

The oil industry represents 30 percent of Venezuela's $100 billion gross domestic product and 70 percent of exports. Venezuela is the world's fifth-largest oil exporter and a major provider to the United States. The strike has helped push international oil prices above $30 per barrel.

Negotiations sponsored by the Organization of American States were set to resume today after a brief break for New Year's. The main topic is the opposition's demand that Chavez submit to early elections or at least a nonbinding referendum on his presidency.

Chavez has vowed not to resign. He argues that Venezuela's constitution allows a binding referendum only in August 2003, halfway into his six-year term.

© 2003 The Washington Post Company

For the Chavez Problem in Venezuela - www.larouchepub.com

U.S. Presidential pre-candidate Lyndon LaRouche has expressed his concern over the dangerous and rapidly degenerating political situation in Venezuela, and in particular over the added complications arising from the highly unstable and erratic behavior of President Hugo Chavez. Chavez's apparent personal state of clinical insanity, represents a significant security threat to the Americas. This, added to the overall explosive situation throughout the hemisphere, threatens to become the detonator which sets off the entire bomb.

LaRouche emphasized that, in his capacity as a leading candidate for the Democratic Party nomination for the 2004 Presidential elections, it would be negligent on his part not to draw attention to this urgent matter, and to emphasize the urgency of choosing the best path towards its solution. There is substantial evidence that Chavez is actually clinically insane. This evidence, which we indicate below, must be duly assessed, LaRouche urged. If Chavez is as insane as appears to be the case, then a prompt, quiet, non-bloody solution must be found and agreed upon by the relevant parties, under which Chavez would be induced to step down from office, perhaps with the assistance of suitable friendly professional advice.

LaRouche emphasized that such an approach is called for immediately, lest others might concoct very bad alternatives to the current Venezuelan chaos, such as coups, assassinations, and other approaches that will only trigger a chain reaction and spread the problem across the region. LaRouche stated emphatically "We don't want an 'Allende solution' to the Chavez problem." LaRouche also rejected the idea, currently promoted by the Inter-American Dialogue and other bankers' think-tanks, of using the Organization of American States (OAS) to orchestrate a supra-national intervention into Venezuelan affairs, in violation of that country's national sovereignty. This mechanism was employed in 2001 by Wall Street and the U.S. State Department, in order to overthrow the Fujimori government in Peru, which established a terrible precedent for the hemisphere.

LaRouche reiterated that his policy for the Americas is in the tradition of John Quincy Adams, Abraham Lincoln, and Franklin Delano Roosevelt, where a community of principle among perfectly sovereign nation-states is the framework in which mutually beneficial economic development tasks are jointly undertaken. -

The Chavez Dossier - The essential evidence of Hugo Chavez's insanity is to be found in what masquerades as his "religious" or "theological" views. Typical were his heady remarks after his forces won 120 out of 130 seats for the Constituent Assembly in July 1999 elections: "The victory of the patriots has been pulverizing!... You are either with God or the devil, and we're with God because the voice of the People is the voice of God.... Now Chavez is not Chavez; Chavez is the People, and the People cannot be stopped! We'll win with God's favor and the People."

Before Chavez ever ran for President of Venezuela, Lyndon LaRouche identified the two years from 1992 to 1994, in which Chavez was jailed under horrendous conditions, as a critical period in turning Chavez from an ordinary fool, into a mental case, producing a "miraculous metamorphosis" in his world-view. The specific form of his insanity, became the text-book Romantic fascist dictum of Vox Populi, Vox Dei: "The Voice of the People is the Voice of God." The controlling sense of personal identity of victims of this outlook—such as Napoleon Bonaparte, or Adolf Hitler—is that of ethereal unity with "the People," and thus with "God." The victim thereby feels entitled to act like a Roman Caesar, displaying impunity and disdain towards other mere mortals.

Since assuming the Presidency in February 1999, at any point at which he has been challenged, Chavez has asserted that dictum, with increasing fervor, as justification for his decisions. When the courts overruled him, he asserted that he is bound by no law or institution, because he represents the People, and thus, by derivation, his is the Voice of God. As the crisis has grown, Chavez's assertion of "Vox Populi" has taken on increasingly "religious" tones, as the Venezuelan population, too, has become increasingly overtaken by charismatic religious movements of various denominations. Each of these reports hearing divine "voices" telling them what they must do—and each of which coheres, to an uncanny degree, with the role which the international oligarchical elites would have them play within their overall game-plan for Venezuela.

In April-May 2000, Chavez attempted to force the Catholic Church hierarchy to bow before him, arguing that "Christ was resurrected from the dead, to become the People," and since Chavez represents the People, he threatened to unleash "legitimate violence" against those in the Church who opposed him. In so doing, he presented himself as a died-in-the-wool Catholic. Then in January 2002, Chavez announced he had become a born-again (Protestant) Evangelical Christian, only to retract the statement four days later. Meanwhile, Chavez's disaffected wife, Marisabel Rodriguez, has shown up at born-again (Protestant) Christian rallies, to urge Chavez to mend his ways.

Chavez's most recent public display of clinical dissociation came in a rambling, five-hour presentation on his national TV/radio show "Hello, President," on Dec. 15, 2002. There Chavez ordered Army troops to ignore any rulings by the courts which were unfavorable to him, and to follow no one's orders but his own. As for those calling for his resignation, he retorted: "Chavez will leave only when God commands, because I am in the hands of Christ.... He is the commander, and when He speaks I obey, understood? And secondly, [I obey] the People. And I assume the voice of the People is the voice of God. I will not leave because of pressures from a group of businessmen, a group of coup-makers, a group of fascists."

From this substratum, numerous secondary expressions of Chavez's insanity are nourished, some of which have been noted in the public media. For example, The New Yorker magazine published a profile of Chavez in its Sept. 10, 2001 issue, written by Jon Lee Anderson, which contained a report on the author's interview with Chavez's psychiatrist, Dr. Edmundo Chirinos. Dr. Chirinos, who considers himself a supporter of the Venezuelan President, explained that Chavez "prefers to embrace dreams that seem impossible to achieve, rather than confronting the harsh realities of life." Anderson summarized Dr. Chirinos's description of Chavez, as "a hyperkinetic and imprudent man, unpunctual, someone who overreacts to criticism, harbors grudges, is politically astute and manipulative, and possesses tremendous physical stamina, never sleeping more than two or three hours a night."

Anderson also interviewed officials at the prison where Chavez was incarcerated in the early 1990s, including the secretary of the prison psychologist from that period. "Every morning, he [Chavez] sat in a chair in the open-air caged yard that had been built specially for him outside his cell," they reported. "There was a plaster bust of Simon Bolivar there, and he would speak to it." He would turn the head around to face him for the conversations, they reported. Anderson also noted that Chavez's aides today report that he is a "caffeine addict," who used to drink 26 cups of espresso a day, until his staff managed to wean him down to "only" 16.